2015 (12) TMI 1624 - HC - VAT and Sales Tax

Dismissal of Entry Tax Challenge; Interim Order on Tax Liability Deposit; Quashing of Interest Demand

The High Court dismissed the challenge to the levy of entry tax under the U.P. Tax On Entry Of Goods Into Local Areas Act, 2007. A Special Leave Petition ... Deposit of interest - the petitioner having deposited the demand made earlier duly for the assessment year 2008-09 - the accrued tax liability/arrears were stayed to the extent of 50 % on payment earliar but the petitioner was required to pay the tax at the prevailing rate for the future period. Held that: - when the writ petition was filed by the petitioner before the High Court the tax that being demanded was for the assessment year 2008-09. The words, 'future period' in the order of the Supreme Court would denote any tax liability that would arise or accrue after the date of the order passed by the Supreme Court, i.e., after 18th of January, 2012. - even if any assessment order is passed after 18th of January, 2012 but relates to any assessment year prior to 18th of January, 2012 would come under the category requiring the accrued tax liability/arrears to be paid up to 50% and the balance 50% by way of bank guarantee. The words 'future period' would include such demand for the period subsequent to 18th of January, 2012. The impugned demand notice requiring the petitioner to pay further amount towards the interest compound is patently misconceived and based on wrong interpretation of the interim order of the Supreme Court - the petitioner has already deposited 50% of the accrued tax liability alongwith interest for the assessment year 2008-09 and therefore, was not required to pay any further amount - petition allowed - decided in favor of petitioner. Issues:1. Challenge to the levy of entry tax under U.P. Tax On Entry Of Goods Into Local Areas Act, 2007.2. Interpretation of the Supreme Court's interim order dated 18th January, 2012 regarding payment of tax liability and interest.3. Enchashment of bank guarantee and demand notice for further payment of interest.Analysis:1. The judgment addressed the challenge to the levy of entry tax under the U.P. Tax On Entry Of Goods Into Local Areas Act, 2007. The petitioners contested the validity of the Act, leading to a dismissal of the writ petition by the High Court. Subsequently, a Special Leave Petition was filed in the Supreme Court, resulting in an interim order dated 18th January, 2012. This order required the petitioners to deposit 50% of the accrued tax liability/arrears under the Act and furnish a bank guarantee for the remaining amount. The petitioners were also directed to pay the tax at prevailing rates for future periods. The judgment highlighted the necessity of complying with the Supreme Court's order in this regard.2. The judgment delved into the interpretation of the Supreme Court's interim order dated 18th January, 2012 concerning the payment of tax liability and interest. The petitioners had already deposited 50% of the accrued tax liability along with interest for the assessment year 2008-09. The court clarified that the term 'future period' in the Supreme Court's order referred to tax liabilities arising after 18th January, 2012. It further explained that any assessment order passed after this date but relating to a period before it would fall under the category of accrued tax liability/arrears. The court's interpretation aimed to resolve the confusion regarding the payment requirements specified in the interim order.3. Additionally, the judgment addressed the issue of the enchashment of a bank guarantee and a subsequent demand notice for further payment of interest. The petitioners had furnished a bank guarantee, which was encashed after the dismissal of the writ petition by the High Court. A demand notice was issued for additional payment of interest, leading to a challenge in the present writ petition. The court, after analyzing the facts and the interim order, concluded that the demand for further payment of interest was misconceived and based on an incorrect interpretation of the Supreme Court's order. Consequently, the impugned orders were quashed, and all the writ petitions were allowed in favor of the petitioners.